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Hello Forum Members,
I'm currently working on a return 1120 s and have encountered a discrepancy that I'm seeking guidance on. Here are the details:
- Net Income: -$4951
- Interest: $44
- Tax Net Income Loss: -$7942
- Book Net Income Loss: -$4932
- Tax Book Difference: $3010
Additionally, the charitable is in the NI calculation because it is from inventory and it was retired from the books due to the donation.during. After I enter the charitable donation of 3035 it creates a discrepancy in the net income . I am unsure how to allocate it in Schedule M-1. Could someone please advise me on the correct way to allocate the charitable contribution in Schedule M-1 given these figures?
Any insights or suggestions would be greatly appreciated. Thank you in advance for your assistance!
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I don't see an M-1 adjustment here. You are either going to deduct is as COGS - reduction in inventory. Or you are going to record it as a charitable contribution - Schedule K -line 13b. Just be sure not to do both.
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Depending on what the items are, it's often best to put this as marketing expense. It's not COGS (because it wasn't sold) and the S Corp doesn't benefit from donation directly, but they did give up product, like a 100% discounted sale. A qualified charity benefits from this being entered as a Sale and then 100% write off (discount) because they then get to show the FMV as public support (but it's COGS to the entity). It all depends on the entity's purpose, what was given, and food/medical gets a special treatment.
You might provide more details: they gave what to whom, how did they treat it for their records and what cost did you use?
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